Coffee Extends Gains on Brazil Worries

Ira Iosebashvili

     Arabica-coffee prices advanced for a fifth consecutive session Friday, rising 14% for the week,
as investors worry about renewed dry weather in Brazil.
     Arabica coffee for delivery in March on the ICE Futures U.S. exchange was recently up 3.8% at
$1.8370 a pound.
     Rain is expected to be sparse in Brazil over the next 10 days, analysts at Newedge said. Brazil
is the source of one-third of the world's coffee and about half of the world's arabica beans.
     Prices rose 50% in 2014, after rainfall in the South American country eased in January,
culminating in Brazil's worst drought in decades. The drought clipped output and fueled worries
about how already weakened trees would fare in 2015, sending prices soaring above $2 a pound and
hitting consumers with a wave of retail-price rises by big roasters such as Starbucks Corp.
     Coffee was the top-performing commodity in 2014 and one of just a few to post a gain amid steep
drops in prices for crude oil, natural gas, copper and soybeans.
     While the market has retreated from those highs, investors are wondering whether a similar
scenario will play out again this year.
     "Right now, it's still too early to declare a drought," said Hernando de la Roche, senior vice
president at INTL FCStone in Miami. "We will have to wait until the end of February to get a better
idea."
     The 2014 coffee harvest in Brazil was the smallest in three years. This year is an off-year in
Brazil's two-year coffee cycle, meaning production would already have been lower without the unusual
weather. Colombia, the world's No. 2 arabica grower, has been ramping up production, which is
helping to alleviate some of the concerns about global supplies. But Colombia only produces about a
quarter as much coffee as Brazil.
     In other markets, orange juice for March delivery was up 0.3% at $1.4160 a pound.
March-delivery cotton was up 0.1% at 60.61 cents a pound. March cocoa was flat at $2,985 a ton after
settling at a two-week high Thursday. The March contract for raw sugar was up 0.1% at 14.89 cents a
pound.